Kamis, 11 Desember 2008

Endowed with rich natural resources and a large population, Indonesia is becoming more attractive for investors as indicated by an increase in the number of realized direct investment projects involving foreign businesspeople.

Chairman of the Investment Coordinating Board (BKPM) Muhammad Lutfi said Wednesday actual domestic and foreign investment had reached US$14.2 billion in the January to November period, higher than the full-year target of $9.92 billion.

Of the total, $12.5 billion was foreign direct investment (FDI), and the remaining $1.7 billion was domestic-based.

“FDI jumped by 40 percent during the period ... But domestic investment plunged by 51 percent,” said Lutfi, who was a member of President Susilo Bambang Yudhoyono’s campaign team during the 2004 election.

“The drop in domestic investment is due to the fact that local companies prefer to form joint ventures with foreign companies in order to pay less tax,” he said, adding that the condition was unlikely to continue as the government would soon implement a new tax law.

Under the new tax scheme, income tax will be slashed to 28 percent in 2009 and to 25 percent in 2010 from the current 30 percent.

The actual investment figure excludes those in the sector of oil and gas, mining, banking and financial institutions, including insurers.

Jakarta received the largest chunk of FDI, reaping $9.62 billion from 404 projects, followed by West Java with $2.39 billion from 255 projects, and Riau with $460.9 million from eight projects.In domestic investment, West Java ranked the top with Rp 3.67 trillion (US$334 million) from 52 projects, tailed by East Java with Rp 2.56 trillion from 37 projects, and Banten with Rp 1.95 trillion from 29 projects.

According to Lutfi, the transportation, storage, telecommunications, metal, machinery, electronics and automotive sectors were the largest contributors to the investment.

“The good news is that so far some 650,000 people have been employed in the realized investment projects (begun) between January and November.” “This is a sign that our investment climate is getting better. We hope the trend will continue, especially through intense and serious efforts by local administrations to net more investors,” Lutfi said.

Last year, FDI reached $10.34 billion; with top sectors including transport, storage, communications and chemicals and pharmaceutical.

Layoffs will not reach into the millions next year as was feared, mainly because of the ability of the informal sector to absorb workers who have been dismissed from the formal sector, the World Bank says.

“The labor market (here) has been quite flexible, but we are expecting unemployment to rise,” World Bank lead economist Wil-liam E. Wallace told reporters Wednesday.

“The number will not reach a million, as people move from formal to informal (sectors). They will not be unemployed, but have less money.”

Businesses have announced possible layoffs for next year amid a rapid decline in export demand due to the global economic downturn.

The Indonesian Rattan Furniture and Craft Producers Association said the industry might lay off up to 35,000 workers, while the Indonesian Textile Association said the industry had temporarily laid off 14,000 workers due to decreased demand from overseas.

Finance Minister Sri Mulyani Indrawati has said the government will prepare a “realistic” response to help businesses cope with slower growth next year, but warned that companies will have to make sacrifices to share the burden.

The government will inject Rp 12.5 trillion (US$1.13 billion) into the 2009 state budget to compensate for a move to waive income tax, value-added tax and import duties to help stimulate the real sector.

The World Bank said the government should speed up spending early next year to stimulate growth, which might reduce unemployment.

Indonesia’s informal sector, which encompass millions of micro and small businesses, is renowned for its resilience, which was tested and found true during the 1997/1998 Asian financial crisis.

Despite the number of layoffs being “manageable”, Wallace said that due to the global economic downturn, Indonesia would see a slower decline in poverty next year.

“The decline in poverty is not as dramatic as before,” he said.

According to the Central Statistics Agency (BPS), a poor person is defined as “consuming” less than Rp 166,700 per month. There are about 19.1 million poor households in Indonesia, or 76.4 million people out of a total population of 235 million.

However, the World Bank’s definition differs — instead classifying a poor person as earning less than US$2 per day.

Wallace forecast that, based on the BPS’s standard, the rate of poor people will fall to 13.8 percent next year from 15.4 percent this year.

He said the forecast included 1.6 million people who will likely not escape poverty because of the effects of the financial crisis on Indonesia.

The World Bank said Indonesia’s economy would grow 4.4 percent next year, a significant drop from 6.1 percent in 2008, in part due to slowing investment and exports as a consequence of the global liquidity crisis.